Pimco Increases Gold Allocation From 10.5% To 11.5% In Commodity Fund

Moments ago, the FOMC members formalized their opinion on where inflation is heading: "Most members continued to anticipate that, with longer-term inflation expectations stable and the existing slack in resource utilization being taken up very gradually, inflation would run over the medium term at a rate at or below the Committee’s objective of 2 percent." The only conclusion one can derive from this is that since the perpetually wrong FOMC committee, which has never accurately predicted any one thing in its entire history, sees little to no inflation, inflation is most likely about to soar. A convenient independent confirmation of this assumption comes from none other than bond manager PIMCO which moments ago announce that it was adding to its gold holdings "on inflation concerns...as it bets that global inflation rates will pick up over the next three to five years." Specifically, "The Pimco Commodity Real Return Strategy Fund, which has about $20 billion in assets, has increased its gold holdings to 11.5% of total assets recently, from 10.5% two months ago, and has been adding to the position when gold prices dipped toward $1,500 a troy ounce, says Nic Johnson, the fund's co-portfolio manager." And with global asset managers allocating about 1% of their AUM to the precious metal, should the majority of them copycat PIMCO in this move, then gold would cross the psychological $2,000 barrier in minutes. The irony is that for a bond manager, which Pimco just happens to be the biggest in the world, inflation is your worst friend. So acknowledging its imminent creep, is hardly "talking one's book."

The money manager predicts global inflation rates will run higher, on average, over the next three to five years than what the world had witnessed over the past 25 years. However, the risk won't arise for another 12 months, during which inflation should be subdued.

Pimco has aired its concerns about inflation in the past and moved to avoid longer-dated Treasury bonds in favor of inflation-protected securities. But the move toward gold is recent and reflects an escalation in the fund manager's concern.

In the face of such risks, "broadly speaking, we prefer owning real assets as opposed to financial assets," Mr. Johnson told Dow Jones Newswires in a recent interview. Three of Pimco's portfolio managers, including the head of the commodities group Mihir Worah and Mr. Johnson, have been on a 17-city U.S. tour since June to raise awareness among institutional investors and larger financial advisers.

Their message: the trifecta of loose monetary policy, persistently high levels of sovereign debt and rising commodity prices will drive inflation higher.

Pimco expects currency devaluation to remain a central theme in the market as global liquidity swells thanks to continued easy-money efforts from the world's central banks. Interest rates, meanwhile, will need to stay low as government debt runs at a high proportion to the overall economy.

"Gold is the currency without a printing press," Mr. Johnson says.

Moreover, investors should purchase gold before inflation rates rise, as "it's the process of going from 2% inflation to 4% inflation that's going to drive gold higher," he says.

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To guard their wealth against the "silent tax," as inflation is often called, Pimco recommends investors stock up on store-of-value commodities like gold and platinum, and hard assets like real-estate investment trusts.

It would appear that with the implied promise from the FOMC that Bernanke will not rest until corn is in the double digits, gold has decided to finally break out above its 200 DMA, and is now headed higher as the coy foreplay of the past 6 months has finally ended.

Don't worry, they just asked for delivery on 300 COMEX contracts. How many times do you think they will have to sell GLD and buy more futures before they get 3.7 tonnes? That's either a long wait or a lot of minor boating accidents.

Listening to capital account the other day it would appear if you are a believer in kondratieff theory we started the winter phase (likley to last 17 odd years) in appx 2000 at the start of the recent and long gold bull run which will have probably another 5 years to run before major bubble alert.

Summarised=========

“Kondratieff Winters historically feature high volatility, slow to negative growth, de-levering (by consumers, corporations, and governments,) hoarding of cash by banks, asset deflation, and economic depressions due to bursting of unsustainable credit bubbles.” (~8min) The transition to winter occurred in early 2000. Each Kondratieff cycle lasts between 15 and 17 years. The bottoming out of this winter cycle should occur in 2016 or 2017. Very difficult times are directly ahead of us.

Talk of a bubble teritory by MSM is way way too early the chart for both Ag and Au has not even started the parabolic phase which is characteristic of a bubblemania. We got 5 years to accumulate like the central banks are doing.

Talk of gold as collateral and money by major players is music to our ears. It's all going according to plan !! keep on averaging up and down monthly and you can't go wrong these next few years i say 3-5 are going to be magical for holders of PMs. Pity the ill informed.

ps a date for your diaries 12 September. It's make or break for Germany and the dilema of whether Germany high Judges agree to the principle of a FED for Europe....

A breakout test will be on the cards but my fear is that this may be the endgame for them and I have not had the tools to convince enough people of the peril. Still a kook in the eyes of family, despite years of being "right".

It keeps looking, smelling, tasting, and feeling like an endgame for so long now. It is a Weird Al Gorerhythm, so to speak. ;-(

I had the experience you are talking about just yesterday. My colleague is convinced he has been alive so long now that even if there is a crash, markets always come back and the trick is to stay in and ride it out.

Some of us are lucky enough to have access to those voices... and for some of us, we do not need to repeat mistakes of the past ourselves in order to learn a lesson. Too bad they could not have been a bit more... constraining on the baby boomers.

If you're not lucky enough to have those voices close by, then go hit up your local nursing home... old people love to have something to talk about other than going to the doctor... it might smell a bit funny, but some laundry and a shower is a small price to pay for first hand accounts... also helps to see perseverance in the eyes of the orator to get a better sense of what to expect.

You cannot do anything. To try and shake them from their coma is futile. The only smelling salts that can be applied are jack booted thugs when the collapse makes itself known. Until then, stack and smile.

I have tried to explain nominal versus real gains to those types and they usually make the face of a dog hearing a dog whistle.

Is there something the matter with us that we are so persistant with our views? I'm like a broken record and have been painted as a evangilist. It's not like I'm trying to talk them into joining Scientology or come walking on coals. "What am I missing from that tool box?" is a question that haunts me.

It is very lonely outside the herd and we are clearly outliers so we tend to seek personal confirmation of our "right" mindedness in some way, shape or form. To take such a drastically contrary view is extremely risky emotionally and socially. And (potentially) physically as well.

History shows that when a country goes Tyrannical the non conformists are beaten into the ground....often first by their own friends, family and neighbors followed by an early morning visit by the men in black. We are taking great risk by speaking out so we reach out to others for the safety of numbers. We are trying to create our own protective pod by enlisting recruits to our way of thinking.

Plus.....there is a deep seated hope that if we could just wake some people up all the coming pain might be reduced..........or maybe even avoided.

Your colleague reminds me of a friend of mine. I live in a hurricane prone area and last year I mentioned that it might be a good idea to start their generator to make sure it's working. (Ethanol is hell on small engines.) She said that they don't have a generator. What? What about all the food in the fridge and freezer that would go bad? She said that during hurricane season she keeps next to nothing in the fridge and freezer so there won't be a big loss.

ahh, but it's only after a significant pullback, will the printers be turned on. you can't front run QE by buying. short the muthafecker then plunge back in once Ben gives the nod as was the case when Obama told the nation that it's a good time to buy stocks prior to one of the instances of QE.

Someone is asleep at the wheel. It looks as if Bill Murphy's call of deep-pocket buyers are in da room and are playing by the cartel's game book and are running the guns after hours, just like they did.

In order to up the gold percentage, they must have lowered some other commodity's percentage. i'd like to know which one. Gold is a hedge against inflation and deflation. But, it can also be influenced by the economy. Values go up with a strong economy due to industrial demand.

The decreased commodity holding would give an indication of whether they were increasing gold as a hedge against monetary pressures or as an investment in a strengthening economy.

Well with Junkers comments today...I almost sold all my gold....but then I came to my senses...I will wait for Merkle to speak...or maybe Draghi...to tell me everthing is AOK in the EURO zone......lol....

I am buying as fast as I can.....this crap gets deeper every day......I do think I will die of paper cuts though...when you are wheelbarrowing around 10 trillion and a wind comes up.....well its a bad way to die

It's kind of true. They made it tempting enough for me by their blatent manipulation. I owe a lot of my more recent gold/silver/platinum purchases to the PPT. Thanks guys! Stacking all I could on the cheap because I knew you were giving it to me as a gift.

"once the markets realize cash is becoming worthless."....not the markets...but the countries..companies..and the people...... realize cash is becoming worthless...PIMCO can change their name...they don´t need the word BOND in it

Smart guys buy ALL the time. When the forwards contracts are paid for at par for cash, then you rethink, or if you are smart, pre-plan now on how to invest the gains without losing grip on your capital when the time is ripe. That's the gold game.

In an unusual arrangement, a senior official of the Bureau of Alcohol, Tobacco, Firearms and Explosives involved in the controversial gun operation Fast and Furious is receiving his government salary while working full time for the investment bank J.P. Morgan, according to two Republican lawmakers.

In a letter Tuesday to B. Todd Jones, the acting ATF director, Rep. Darrell Issa (R-Calif.) and Sen. Charles E. Grassley (R-Iowa) said that Deputy Assistant ATF Director William McMahon, who oversaw the agency’s Western region during the Fast and Furious operation, has been receiving two salaries simultaneously.

"With the Bernanke and the Fed on a printing tear "......don´t forget the ECB and Japan...they will both be running the race too.....and it is a race now.....who can devalue the currency the fastest....and China will be buying crap all over the world....and little Central Bankers in the smaller countries will be buying PM´s as fast as they can...people can see the wall now...can smell the carnage coming up...and are turning to the survival mode....its not in treasuries....its not in other people currencies.....its only in Gold and Silver now....PM´s...

I just front ran PIMCO! Bought a 1/10 oz gold panda yesterday! You know if everyone in the world that had $180 disposible income in their pocket bought a 1/0 oz of gold just for kicks it would turn the bankers world upside down.

ZH, how about some articles about ending capital gain taxes on PHYSICAL gold? It's fine if they want to tax the paper traders, but come on...physical buyers are not purchasing bullion as a collectible. Need more pressure and outroar over that tax.

Don't you understand - the gooberment luvs u! They want you to be healthy with their "free" health care (as long as you pay for it or you'll be fined and as long as you aren't too old and poor) and they want you to retire (on their social security that you helped fund every day you worked and you'll be getting less than necessary when your time comes) as well as save your money (even though Fed policies prevent savings from accruing any significant interest) but the one thing you must NOT do is use their currency to "speculate" on evil gold and silver that will obviously ruin you and your hard earned money so they must tax you to prevent you from harming yourself.

It is all for your own benefit really and if you can't see that your dosage of Choom-Aid needs to be upped.

*edit - I forgot that your Choom-Aid must also not have sugar or corn syrup in it or you'll be forced to vomit it all back up so that it can be subsidized into ethanol.